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A Theory of Factor Allocation and Plant Size

  • Thomas J. Holmes
  • Matthew F. Mitchell

In this paper we develop a theory of how factors interact at the plant level. The theory has implications for: (1) the micro foundations for capital skill complementarity (2) the relationship between factor allocation and plant size and (3) the effects of trade and growth on the skill premium. The theory is consistent with certain facts about factor allocation and factor price changes in the 19th and 20th centuries.

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File URL: http://www.nber.org/papers/w10079.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10079.

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Date of creation: Nov 2003
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Publication status: published as Thomas J. Holmes & Matthew F. Mitchell, 2008. "A theory of factor allocation and plant size," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 329-351.
Handle: RePEc:nbr:nberwo:10079
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  1. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  2. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  3. Claudia Goldin & Lawrence F. Katz, 1996. "The Origins of Technology-Skill Complementarity," NBER Working Papers 5657, National Bureau of Economic Research, Inc.
  4. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  5. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  6. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  7. Kenneth R. Troske, 1999. "Evidence On The Employer Size-Wage Premium From Worker-Establishment Matched Data," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 15-26, February.
  8. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier.
  9. Todd Idson, 2000. "Employer Size Effects in Russia," William Davidson Institute Working Papers Series 300, William Davidson Institute at the University of Michigan.
  10. Markus Mobius & Raphael Schoenle, 2006. "The Evolution of Work," Working Papers 25, Brandeis University, Department of Economics and International Businesss School.
  11. Matthew F. Mitchell, 2001. "Specialization and the skill premium in the 20th century," Staff Report 290, Federal Reserve Bank of Minneapolis.
  12. Jeremy Atack & Fred Bateman & Robert A. Margo, 2000. "Rising Wage Dispersion Across American Manufacturing Establishments, 1850-1880," Vanderbilt University Department of Economics Working Papers 0036, Vanderbilt University Department of Economics.
  13. Brown, Martin & Philips, Peter, 1986. "Craft Labor and Mechanization in Nineteenth-Century American Canning," The Journal of Economic History, Cambridge University Press, vol. 46(03), pages 743-756, September.
  14. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  15. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
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